Star stock picker Terry Smith has suffered a pay cut after a downturn in results for his Fundsmith investment vehicle – but he still took home more than £140million.
Assets under management fell by 8 per cent to £36.4billion in the year to the end of March according to accounts filed at Companies House.
Fundsmith, best known for Smith’s £22.3billion Fundsmith Equity fund, said the decline was mainly a result of investors pulling their money out, as well as performance of the funds.
The results come amid evidence that many investors across the UK, squeezed by inflation pressures and attracted by rising interest rates elsewhere, are shunning equities.
Fundsmith’s profits fell by 14 per cent to £50million while turnover fell 22 per cent to £279million.
Pay cut: Assets under management at Terry Smith’s Fundsmith fell by 8% to £36.4bn in the year to the end of March
Under the firm’s partnership structure its highest-paid member, Smith, was paid £31million, down from £36million a year earlier.
The company was also charged £186million in feed by Mauritius-based Fundsmith Investment Services (FIS), down from £252million a year earlier. Smith, who is thought to own 61 per cent of FIS, could be entitled to £113million of that.
That would leave him with a £144million haul, down from the previous year’s £190million.
Fundsmith declined to comment on the calculation.
Smith, 70, originally from London but based in Mauritius, is Britain’s best-known stock picker. His pay far exceeded that of UK-listed fund group bosses, with Sir Nigel Wilson, chief executive of Legal & General, taking home £4million last year, and Peter Harrison, chief executive of Schroders, receiving £4.7million.
His style of investing in growth stocks came under intense pressure at the end of last year owing to rising interest rates pushing down company valuations – particularly among tech stocks – in which the fund was invested.
The fund’s other top holdings include Microsoft, L’Oreal, and luxury goods company LVMH.
Smith’s style is to invest in a small number of ‘high quality, resilient, global growth companies’, that he aims to hold over the long term.
He has become known for his outspoken views on companies such as consumer goods giant Unilever, which he accused of ‘ludicrous virtue signalling’.
Smith famously once declared that ‘a company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot’.
More recently he revealed why he was dumping shares in US online retail behemoth Amazon after just two years.
He said that was down to a concern over ‘potential capital misallocation’ after chief executive Andy Jassy signalled his intention to expand its grocery retail business.
Amazon had ‘already stubbed its toe’ in the sector when it bought the Whole Foods chain, he added, in a letter to investors in July.
Elsewhere in the letter, Smith implied that he had been vindicated after holding onto shares in Meta – the owner of Facebook, Instagram and WhatsApp – after they slumped in 2022 but were up by 70 per cent over the past year, but adding he was ‘too paranoid to ever declare victory’.
And he said that large tech companies had ‘become victims of their own success’ growing so large that they have become part of the wider economic cycle.
‘Apple and Alphabet will almost certainly have down years in 2023 but we expect a decent bounce in 2024,’ he added.
Smith acknowledged threats to the economic environment posed by interest rates, inflation and recession as well as the Ukraine war and tensions with China but said: ‘We do not invest on the basis of our predictions about macroeconomics and geopolitics.’
Kickboxing fund boss doesn’t pull his punches
Tough-talking Terry Smith earned his spurs in the City and today plies his trade from warmer climes thousands of miles away.
The son of a lorry driver, he grew up in east London but lives in Mauritius.
After gaining a first in history at University College Cardiff, he joined Barclays where he gained his reputation for picking a winner – and speaking directly.
He famously once told investors to sell shares in the lender even as he worked for its own investment banking arm BZW.
And in 1992 he was sacked from his £325,000 a year job at City firm UBS Phillips & Drew after he refused to withdraw a book he had written criticising accounting standards at many UK companies.
Later, he joined Collins Stewart, leading a management buyout and taking it through a merger, before launching Fundsmith with a £25million investment.
A boxing fan and qualified helicopter pilot, the pugilistic Smith is an exponent of Muay Thai, or Thai boxing.
He said of his move to the island paradise: ‘Mauritius is much more convenient in terms of its time zone than London for dealing in Asian markets and I find being away from the “noise” of London helpful.’
It has been claimed he favoured colleagues who were like him – without inherited wealth.
He is reported to devour thousands of research notes, annual reports and industry publications a week, from Tissue World magazine to Elevator World, to discover every last detail about a company.
Smith’s strategy is simple: ‘Buy good companies, don’t overpay, do nothing.’